Critical Condition

CAP Action Dowdifies CBO Medicare Report

A Harvard economics professor has made a strange claim about a 2006 Congressional Budget Office report on Medicare premium support. Writing for the Center for American Progress Action Fund, a liberal lobbying organization, Dr. David Cutler and his co-authors assert that “CBO concludes that premium-support plans would achieve much of their federal savings from ‘increases in the premiums paid by beneficiaries, not from increases in the efficiency of health care delivery.’” This would be a strong negative finding indeed. But that is not, in fact, what CBO concluded. 

The quote is lifted from a paragraph in which the CBO outlines why opponents dislike premium-support reform. The full sentence, found on the first page reads, “Opponents also maintain that much of the federal savings from premium support would come from increases in the premiums paid by beneficiaries, not from increases in the efficiency of health care delivery.” In other words, Dr. Cutler — a foe of premium support — is presenting his viewpoint, but labeling it as a CBO conclusion.

This is unfortunate. Using this new methodology and citing the same report, one could just as easily say that CBO concludes that premium support would “lead to a more efficient Medicare program, one in which the government and beneficiaries received more for the money that is spent on Medicare, whatever that level of spending might be, than they do today.”

In fact, CBO drew very few conclusions in its 2006 report. It did, however, present one very important conclusion: that premium support, based on a process of competitive bidding, would save substantial money for taxpayers. The most money would be saved with the federal share of Medicare based on the lowest competitive bid. CBO found that much of this savings would be from the high-cost areas of traditional Medicare. 

Medicare is a complex policy issue, and clarifying the policy options in a fashion that is understandable to the general public is the right thing to do. It is unfortunate that Dr. Cutler and his co-authors chose to misrepresent the CBO conclusions.

— Rea Hederman is assistant director of The Heritage Foundation’s Center for Data Analysis.

Rea Hederman is the executive director of the Economic Research Center and vice president of policy at The Buckeye Institute.